Cullingworth nestles in Yorkshire's wonderful South Pennines and I have the pleasure and delight to be the village's Conservative Councillor. But these are my views - on politics, food, beer and the stupidity of those who want to tell me what to think or do. And a little on mushrooms.

Sunday, 22 July 2012

In defence of tax havens (and why we should be one)

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I have this mental image of rich folk in tax havens. It’s
the mental image that the people who don’t approve of tax havens want you to
have – slightly foreign-looking men hunched over piles of filthy lucre smirking
as they count it or slightly overweight blokes in badly co-ordinated clothes
lighting cigars with $100 notes. We might summon up a scene by the pool as
portly plutocrats frolic with blonde bimbos laughing all the while at their
ill-gotten gains.

It is clear that these tax haven denizens are the lowest of
the low prepared to leave the ordinary people of their homeland in Dickensian squalor
while they live in the lap of (rather poor taste) luxury. And – according to so
self-appointed experts – this is $21 trillion’s worth of luxury’s lap. How dare
they!

This selfish act – shifting the cash to a place where it’s
not a risk of confiscation – is the 21st century’s most monstrous
evil. It’s not their money – it is taxes.

These estimates reveal a staggering failure," says John Christensen of
the Tax Justice Network. "Inequality is much, much worse than official
statistics show, but politicians are still relying on trickle-down to transfer
wealth to poorer people.

"This new data shows the exact opposite has happened: for three decades
extraordinary wealth has been cascading into the offshore accounts of a tiny
number of super-rich."

Well actually “this data” shows nothing of the sort. What
the data shows is threefold:

The people in charge of undemocratic, autocratic
regimes in the developing world have shifted their cash (whether or not it is
ill-gotten) to places where it’s safe. This isn’t about tax avoidance – one of
the features of developing countries is their inability to raise taxes (which,
by the way, is why over a third of Uganda’s national budget is overseas aid). It’s
about ensuring that most of the cash stays in the family and isn’t lifted by
the next generation of kleptocrats. According to the Guardian’s jolly infogram
just 20 developing countries account for $7.5 trillion of the stashed cash.

The second problem is that no distinction is
made between income and assets. Most places don’t tax assets so it’s perfectly
possible for a lot of this cash to have already been taxed. Perhaps not at the
confiscatory rates prefers by Guardian readers but taxed nonetheless. And the
implication (a pretty daft one if you ask me) is that all this money is held as
cash. And that it’s stored in a big vault in the manner of Scrooge McDuck.
Forgive me for thinking that most of these bloated capitalist billionaires
would prefer that their cash did some work for them while stashed away avoiding
tax? Which means it’s generating more wealth and (as a by-product) creating
jobs, supporting businesses and generally doing that good stuff that money
well-used – note this you wasteful governments – does.

Finally, no-one spots the other part of the
problem – tax rates on income are too high. This isn’t just the moral offence of
taking half of what someone works to earn. It’s much more practical than that –
if, as a result of our tax regimes or other confiscatory laws, rich people
bundle up their cash and stick it somewhere else, then it’s our tax system that
is the problem rather than the “ethics” of the rich people.

I like tax havens. They help – or should help – keep governments
honest in matters of tax.More
importantly these places attract billions (trillions even) of lovely pounds,
dollars, euros and yen. Wouldn’t you rather that all this money was being
managed from your country instead of sitting in Switzerland, Jersey or the
Seychelles making those places filthy rich?

The solution is really simple –
institute privacy protection on personal assets and set the tax rates on income
and capital gains at a lower level. Do this and watch the money pour into your
coffers where it can be reinvested in new business, creating wealth and, by
these acts, jobs and income for the poor in their Dickensian squalor.

Did you know that Belgium is tax haven? That's why Amazon et al use it as a place to do most of their business from rather than the UK.

Tax havens aren't always little islands in the middle of no where desperate to suck in loads of money. They are anywhere where the tax regime allows for a particular tax to be taxed at a lower rate than your own country.